by Ed Zwirn

Is the Cloud Really Cheaper?

Feb 01, 20122 mins
Cloud ComputingSaaS

If your company is thinking of saving money by migrating to the cloud, don't forget to look to the long term return, a study suggests.


That there is growing company demand for cloud or software-as-a-service solutions should come as no surprise.

Finance and IT professionals, facing the need for greater computing power for everything from operational management to hedge accountingare understandably tempted by SaaS, given the cloud’s relatively low startup costs and the fact they may lack the skills needed to build their own analytic solutions.

And the corporate migration to the cloud is in fact proceeding apace, with nearly one-third of organizations polled in a Gartner research study responding that they either already use or plan to use cloud SaaS offerings to augment their core business intelligence functions.

‘Frustrated by BI Demands’

But CFOs had better do their homework when determining how much it will cost them to use these offerings.

Software purchased as a service can usually be expensed, rather than capitalized, on the balance sheet. Buyers often think that SaaS is cheaper, but the reality is more complicated, with Gartner’s cost models showing SaaS can be cheaper over the first five years, but not thereafter.

The long-term benefits lie elsewhere — including in cash flow and reduced IT support costs, the report says.

“Business users are often frustrated by the deployment cycles, costs, complicated upgrade processes and IT infrastructures demanded by on-premises BI solutions,” said James Richardson, research director at Gartner. “SaaS- and cloud-based BI is perceived as offering a quicker, potentially lower-cost and easier-to-deploy alternative, though this has yet to be proven.”

SaaS and Faster Deployment

The use of SaaS may nevertheless lead to faster deployment, insight and value, particularly where IT is constrained by existing work and/or limited budget so that it cannot respond to demands for information and analysis as quickly as the business requires, says the report.

“It’s evident that, despite growing interest, the market is confused about what cloud/SaaS BI and analytics are and what they can deliver,” Richardson said.

Responding to the survey were 1,364 IT managers and business users of BI platforms in the fourth quarter of 2011. While only 17% of the organizations they work for said they have replaced or plan to replace parts of their core BI functions with cloud/SaaS offerings, 27% already use or plan to use cloud/SaaS options to augment their BI capabilities for specific lines of business or subject areas in the next 12 months.